Page 221 - IC38 GENERAL INSURANCE

Example

A group of members working in mines or factories is at higher health risk than a
group of members working in air-conditioned offices. Also the nature of diseases
(thereby claims) are also likely to be quite different for both groups.
Therefore, the insurer will price the group health insurance policy accordingly
in both the cases.

Similarly to avoid adverse selection in case of groups with high turnover such as
IT companies, insurers can introduce precautionary criteria requiring employees
to serve their probationary period before becoming eligible for insurance.

Due to highly competitive nature of group health insurance business, insurers
allow substantial flexibility and customization in benefits of the group insurance
plans. In employer-employee group insurance plans, the benefits design is
usually developed over time and used as an employee retention tool by the
human resources department of the employer. Often, the flexibility is the result
of competition among insurers to match or improve the benefits of the existing
group insurance plan given by another insurer to capture and shift business.

2. Underwriting other than employer- employee groups

Employer-employee groups are traditionally the most common groups offered
group health insurance. However, as health insurance gains acceptance as an
effective vehicle of financing healthcare expenditure, different types of group
formations have now developed. In such a scenario, it is important for group
health insurance underwriters to take into consideration the character of the
group composition while underwriting the group.

In addition to employee-employer groups, insurers have provided group health
insurance coverage to varied type of groups such as: labour unions, trusts and
societies, multiple-employer groups, franchisee dealers, professional
associations, clubs and other brotherhood organizations.

Governments in different countries have been buyers of group health insurance
coverage for poorer sections of the society. In India, governments both at the
central and state level have aggressively been sponsoring group health
insurance schemes for the poor e.g. RSBY, Yeshaswini etc.

Though basic underwriting considerations for such diverse groups are similar to
generally accepted group underwriting factors, additional aspects include:

a) Size of the group (small group size may suffer from frequent changes)
b) Different levels of healthcare cost in different geographical regions
c) Risk of adverse selection in case all group constituents do not participate

in the group health insurance plan
d) Continuation of members in the group in the policy
There has been a growth in irregular types of group formations just to take
advantage of such group health insurance benefits at cheap prices, called

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